Which of the following is a factor indicating that a company is a price-taker?

• A. The company has significant control over the market price due to brand loyalty.
• B. The company can influence market supply by adjusting its output.
• C. The company sells a standardized product in a market with many buyers and sellers.
• D. The company faces high barriers to entry in its industry.

Answer: (C)

Verified step by step guidance

1. Understand the concept of a price-taker: A price-taker is a firm that accepts the market price as given and cannot influence it by its own actions.
2. Identify characteristics of a price-taking firm: Typically, such firms sell standardized (homogeneous) products, operate in markets with many buyers and sellers, and face no significant barriers to entry or exit.
3. Analyze each option in the problem: - If a company has significant control over price due to brand loyalty, it is likely a price-maker, not a price-taker. - If a company can influence market supply by adjusting output, it has some market power, so it is not a pure price-taker. - Selling a standardized product in a market with many buyers and sellers fits the definition of a price-taker. - High barriers to entry usually reduce competition, which contradicts the price-taker condition.
4. Conclude that the factor indicating a company is a price-taker is when it sells a standardized product in a market with many buyers and sellers.
5. Remember that price-taking behavior arises from the firm's inability to influence market price due to the competitive nature of the market and product homogeneity.